IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Trust in Cohesive Communities

  • Felipe Balmaceda

    ()

    (Facultad de Economía y Empresa, Universidad Diego Portales)

  • Juan Escobar

    ()

    (Departamento de Ingenieria Industrial, Universidad de Chile)

This paper investigates the social structures that maximize trust and cooperation when agreements are implicitly enforced. We study a repeated trust game in which the social network determines the information transmission technology. We show that cohesive communities, modeled as social networks of complete components, emerge as the optimal community design. Cohesive communities generate some degree of common knowledge of transpired play that allows players to coordinate their punishments and, as a result, yield relatively high equilibrium payo s. Our results provide an economic rationale for the commonly argued optimality of cohesive social networks.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.udp.cl/descargas/facultades_carreras/economia/pdf/documentos_investigacion/wp_40_balmaceda-escobar-april2013-v2.pdf
Download Restriction: no

Paper provided by Facultad de Economía y Empresa, Universidad Diego Portales in its series Working Papers with number 40.

as
in new window

Length:
Date of creation: Jun 2013
Date of revision:
Handle: RePEc:ptl:wpaper:40
Contact details of provider: Web page: http://www.udp.cl

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Ahn, Illtae & Suominen, Matti, 2001. "Word-of-Mouth Communication and Community Enforcement," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(2), pages 399-415, May.
  2. Okuno-Fujiwara Masahiro & Postlewaite Andrew, 1995. "Social Norms and Random Matching Games," Games and Economic Behavior, Elsevier, vol. 9(1), pages 79-109, April.
  3. Szeidl, Adam & Rosenblat, Tanya & Mobius, Markus & Karlan, Dean, 2009. "Trust and Social Collateral," Scholarly Articles 3051620, Harvard University Department of Economics.
  4. Glenn Ellison, 1994. "Cooperation in the Prisoner's Dilemma with Anonymous Random Matching," Review of Economic Studies, Oxford University Press, vol. 61(3), pages 567-588.
  5. Mailath, George J. & Samuelson, Larry, 2006. "Repeated Games and Reputations: Long-Run Relationships," OUP Catalogue, Oxford University Press, number 9780195300796, December.
  6. Jeffrey C. Ely & Johannes Horner & Wojciech Olszewski, 2003. "Belief-free Equilibria in Repeated Games," Levine's Working Paper Archive 666156000000000367, David K. Levine.
  7. Itay Fainmesser, 2010. "Community Structure and Market Outcomes: A Repeated Games in Networks Approach," Working Papers 2010-14, Brown University, Department of Economics.
  8. Matthew O. Jackson & Tomas Rodriguez-Barraquer & Xu Tan, 2012. "Social Capital and Social Quilts: Network Patterns of Favor Exchange," American Economic Review, American Economic Association, vol. 102(5), pages 1857-97, August.
  9. Greif, Avner, 1993. "Contract Enforceability and Economic Institutions in Early Trade: the Maghribi Traders' Coalition," American Economic Review, American Economic Association, vol. 83(3), pages 525-48, June.
  10. Jeffrey C. Ely & Juuso Valimaki, 1999. "A Robust Folk Theorem for the Prisoner's Dilemma," Discussion Papers 1264, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  11. Lippert, Steffen & Spagnolo, Giancarlo, 2011. "Networks of relations and Word-of-Mouth Communication," Games and Economic Behavior, Elsevier, vol. 72(1), pages 202-217, May.
  12. Felipe Balmaceda & Juan F. Escobar, 2012. "Self Governance in Social Networks of Information Transmission," Documentos de Trabajo 290, Centro de Economía Aplicada, Universidad de Chile.
  13. Giancarlo Spagnolo & Steffen Lippert, 2004. "Networks of Relations," Econometric Society 2004 North American Winter Meetings 496, Econometric Society.
  14. Bendor, Jonathan & Mookherjee, Dilip, 1990. "Norms, Third-Party Sanctions, and Cooperation," Journal of Law, Economics and Organization, Oxford University Press, vol. 6(1), pages 33-63, Spring.
  15. Michihiro Kandori, 1992. "The Use of Information in Repeated Games with Imperfect Monitoring," Review of Economic Studies, Oxford University Press, vol. 59(3), pages 581-593.
  16. Michihiro Kandori, 2001. "Introduction to Repeated Games with Private Monitoring," CIRJE F-Series CIRJE-F-114, CIRJE, Faculty of Economics, University of Tokyo.
  17. Bernstein, Lisa, 1992. "Opting Out of the Legal System: Extralegal Contractual Relations in the Diamond Industry," The Journal of Legal Studies, University of Chicago Press, vol. 21(1), pages 115-57, January.
  18. Felipe Balmaceda & Ronald Fischer, 2010. "Economic performance, creditor protection, and labour inflexibility," Oxford Economic Papers, Oxford University Press, vol. 62(3), pages 553-577, July.
  19. Michihiro Kandori, 1992. "Social Norms and Community Enforcement," Review of Economic Studies, Oxford University Press, vol. 59(1), pages 63-80.
  20. Alexander Wolitzky, 2013. "Cooperation with Network Monitoring," Review of Economic Studies, Oxford University Press, vol. 80(1), pages 395-427.
  21. Paul R. Milgrom & Douglass C. North & Barry R. Weingast, 1990. "The Role Of Institutions In The Revival Of Trade: The Law Merchant, Private Judges, And The Champagne Fairs," Economics and Politics, Wiley Blackwell, vol. 2(1), pages 1-23, 03.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:ptl:wpaper:40. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Enrique Calfucura)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.